Recent Trades – Options

Last week, I wrote two covered calls on the following positions.
IAMGold Corp (IMG.TO)
IAMGold has been the dog in my portfolio. When I first started the position in my portfolio, the stock was paying a healthy 5% yield and had a 5-yr dividend growth rate of 33%. But last year saw the decline in gold prices which started cutting into the operating margins at the company – which resulted in IAMGold suspending its dividends. I have continued holding the position as it is still a great company and continues to be one of the most efficient companies in the sector. However, the weakness has resulted with this stock ending up in the red and I have decided to sell it to move my commodities exposure to some other company. However, instead of directly selling at today’s prices, I decided to write covered call options instead and let the market decide for me. I wrote seven Sep 20th calls with a strike price of $5.00 resulting in a total of $49.00¬†in premium. If the stock stays below $5.00, I keep the premium. If it rises above $5.00, the option will get called and I sell and exit my position. Considering that this is high season for gold stocks, the likelihood of the stock going north of $5.00 is higher.
The Jean Coutu Group (PJC.A.TO)
The Jean Coutu Group is a great stock, but with a current yield of 1.85%, I feel that there are better options out there. Although the stock has a great dividend growth rate, I have enjoyed a significant jump in unrealized profits. I ended up writing one Sep 20th call with a strike price of $22.00 resulting in a $30.00 premium.This adds $79.00 to my monthly income, which will handsomely bump up my overall passive income for the month of August.Disclosure: My full list of holdings are available here.

 

8 thoughts on “Recent Trades – Options

    • I am a rookie too. I dont use them that often….looking at my spreadsheets – the last time I wrote options was last fall. I’d like to write OTM puts, but all my accounts are tax sheltered and they stop me from writing those type of option contracts in the account type. I need to get a margin account setup for that.

      Thanks for stopping by
      R2R

  1. I’m not a big fan of selling calls but in this case I’d probably do the same thing. I typically only like to sell calls if I’m wanting to exit a position but it doesn’t necessarily have to be quick. What’s your preference for these calls? Want them to be exercised on the first round?

    • Hey JC, I am not a fan of options as well unless I want to sell and exit the position….which is true in this case. And the companies are doing fine, so I am in no rush to sell. I would like the IMG.TO call exercised, as I’d like to stay invested in a mining company that pays and raises dividends. Like I said in the post, IMG was great until last year when they decided to cut their dividends.

      regards

  2. Not bad covered calls. I keep wanting to buy gold stocks but I am just so nervous about them. I really dont know where the gold trend is going.Great stock to hold in a recession tho.

    genera;lly I like the idea of covered calls for additional income. Lets you play a bit on long holds

    • Yeah I think its always good to keep a bit of gold in the portfolio – in case we see some crazy inflation. Just holding gold per se, I see it as dead money – which is why I picked a gold mining company – but after the dividend cut last year, I am looking to exit IMG and pick up something else instead. I knew it was risky going in with a smaller company of $2B cap. Oh well…live and learn.

      Thanks for stopping by
      R2R

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